GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

TOPIC: BANK RECONCILIATION

SECTION A: TYPICAL EXAM QUESTIONS

Learner Note:
Always answer in point form
Make sure you learn your theory on bank reconciliations
Open ended questions do not have one correct answer

QUESTION 1: 42 marks 25 minutes

BANK RECONCILIATIONS AND INTERPRETATION

You are provided with information relating to Trial Traders

REQUIRED

1.1 Explain why it is important for a business to prepare a bank reconciliation

statement each month (3)
1.2 Calculate the correct totals for the Cash Receipts Journal and the Cash
Payments Journal for August 2009 (12)
1.3 Complete the bank account in the General Ledger on 31 August 2009. (6)
1.4 Prepare the Bank Reconciliation Statement on 31 August 2009. (10)
1.5 Refer to information 3 below
Calculate the amount invested in the fixed deposit (3)
What advice would you provide in order to avoid interest on the
overdraft? Explain briefly. (2)
1.6 Refer to information 4 below
Explain why the internal auditor should be concerned about the
outstanding deposit of R23 456 (3)
Explain how cheque No.599 should be treated when the financial
Statements are prepared on 31 August 2009. Provide a reason for
your answer (3)

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

INFORMATION

1. At the end of the previous month, 31 July 2009 , the following items were reflected in the
Bank Reconciliation Statement:
Favourable balance in the ledger of Happy Traders, R6 325
Favourable balance on the bank statement, R2 575
Outstanding deposit(dated 31 July 2009,R19 700
Outstanding cheques:
No. 001(Dated 12 February 2009), R8 900
No.213 (Dated 1 April 2009), R3 400
No.313 (Dated 28 August 2009), R7 860
Note: Only cheque No.313 appeared on the Bank Statement in August 2009.

2. On 31 August 2009, the provisional totals in the Journals were:

Cash receipts journal R87 000
Cash payments journal R109 000

3. The following items were reflected on the Bank Statement but not in the journals for
August 2009:
Direct deposit by a debtor, T.Twala, R3 400
Bank charges,R656
Interest on fixed deposit for August (10%p.a) R900
Interest on overdraft for August, R989
Debit order in favour of Safeway insurance Co. R770
Dishonoured cheque on 31 August 2009, originally presented by a debtor, C.Cheat,
R2 600

4. The following differences were noticed:

Cheque no.415 for repairs was shown in the CPJ as R1 779 but on the August bank
statement as R1 997.The bank statement is correct.
A deposit of R19 700 appeared on the bank statement on 1 August 2009, but
did not appear in the August CRJ.
A deposit of R23 456 dated 27 August 2009 appeared in the August CRJ but not on
the August bank statement.
The following cheques appeared in the August CPJ but not on the Bank Statement:
No. 555(Dated 23 August 2009), R5 678
No.599 (Dated 31 December2009), R4 999

5. On 31August 2009 the Bank Statement reflected unfavourable balance of R17 087
[42]

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

QUESTION 2: 30 marks 20 minutes

BANK RECONCILIATION AND INTERNAL CONTROL

Top Dog Traders employs Joe Cryme to write up the books, do the bank deposits and issue
cheques. You are required to assist as internal auditor.
REQUIRED:
2.1 Why does a business prepare a Bank Reconciliation Statement each month? (2)
2.2 Calculate the correct totals in the Cash Receipts Journal (CRJ) and Cash
Payments Journal (CPJ) for October 2010. (10)
2.3 Prepare the Bank Reconciliation Statement on 31 October 2010. (10)
2.4 Refer to Information numbers 4 and 8 below.
2.4.1 It appears that Top Dog Traders will not be able to recover all
amounts, or part of the amounts, lost due to the fraudulent
activities of Joe Cryme. If you were the owner of this business,
what steps would you take against Joe Cryme? Provide TWO
steps. (2)
2.4.2 Explain why the rule of prudence will be used in accounting for the
fraudulent activities in the books and the financial statements. (3)
2.4.3 Explain what was wrong with the procedures in the accounting
department which led to this type of fraudulent activity. (3)

INFORMATION:

1. At the end of the previous month, 30 September 2010, the following items
appeared in the Bank Reconciliation Statement:

Balance per Bank Statement 17 000

Outstanding deposits for cash sales:
Dated 28 September 2010 30 000
Dated 30 September 2010 12 400
Outstanding cheques:
502 (dated 19 April 2010) 6 200
613 (dated 24 September 2010) 13 400
614 (dated 27 September 2010) 9 100
Balance per bank account 30 700
2. The balance on the Bank Statement is R40 092 (favourable) on
31 October 2010.
3. The provisional totals in the journals for October 2010 before reconciling to
the bank statement are: CRJ R510 000 and CPJ R463 600

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

4. From the bank reconciliation for September 2010 only the outstanding deposit
of R12 400 and cheque No. 614 appeared on the October Bank Statement.
The R30 000 reflected on the deposit slip, dated 28 September, was never
deposited into the bank account by Joe Cryme. He cannot account for the
whereabouts of the cash.
5. The October Bank Statement reflected bank charges of R1 310 and interest
of R102 on the favourable bank balance.
6. A dishonoured cheque was reflected on the Bank Statement, R1 700. This
was originally received from a debtor in payment of his account.
7. A direct deposit of R5 500 from a tenant was reflected on the Bank
Statement.
8. As internal auditor you also detected that cheque No. 642 for R18 000
appeared on the Bank Statement, but not in the CPJ. The bookkeeper,
Joe Cryme, forged the signatures and used the funds for personal benefit.
9. Cheque No. 633 was reflected in the CPJ as R2 630, but on the Bank
Statement it was reflected as R6 230. The amount on the Bank Statement is
correct.
10. The following items appeared in the October CRJ and CPJ, but not on the
Bank Statement:
No. 652 R3 800 (dated 15 November 2010)
No. 655 R1 300
A deposit of R12 700 for cash sales. [30]

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

SECTION B: ADDITIONAL CONTENT NOTES

Bank reconciliation entries at a glance

The following table represents where transactions are to be entered:

Transaction CRJ CPJ Bank Recon No
DR CR entry
Direct deposit into the bank account as
reflected on the B/S.
Stop / debit orders / electronic
payments appearing on the B/S.
Bank charges and interest on overdraft.
Cancellation of cheques (stale, stop
payment, stolen or altered cheques).
Interest on favourable bank balance.

Cheques issued, but not appearing on

the B/S.
Cheques outstanding on the previous
B/R recon, but appearing in the current
B/S.
Cheques outstanding on the previous
B/R recon, but still not appearing in the
current B/S.
Outstanding deposits.

Deposit outstanding previously, but

appearing in the current B/S.
Dishonoured cheques.

Post-dated cheques issued.

Post-dated cheques received.

Error in the CPJ

Amount in the CPJ is higher than
the original cheque.
Amount in the CPJ is lower
than the original cheque.

Error on the B/S

Amount incorrectly debited

Amount incorrectly credited

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

SECTION C: HOMEWORK

QUESTION 1: 40 marks 25 minutes

RECONCILIATIONS AND INTERNAL CONTROL

INFORMATION:
You are provided with the last two months Bank Reconciliation Statements of
Umlazi Traders.
Bank Reconciliation Statement of Umlazi Traders on 30 April 2008
R
Debit Balance as per Bank Statement 26 650
Outstanding Cheques:
No. 123 (dated 25 November 2007) 285
No. 335 (dated 28 February 2008) 260
No. 438 (dated 15 April 2008) 775
No. 447 (dated 30 April 2008) 2 300
No. 448 (dated 25 June 2008) 5 000
Outstanding Deposits 41 350
Credit Error on Bank Statement 250
Balance as per Bank Account in the General Ledger ?

Bank Reconciliation Statement of Umlazi Traders on 31 May 2008

Debit Balance as per Bank Statement 23 270
Outstanding Cheques:
No. 335 (dated 28 February 2008) 260
No. 448 (dated 25 June 2008) 5 000
No. 473 (dated 22 May 2008) 3 300
Outstanding Deposits 31 600
Credit Balance as per Bank Account in the General Ledger 230

REQUIRED:

Refer to the Bank Reconciliation Statements of April and May 2008 and answer the questions
that follow:

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

1.1 According to the April 2008 Bank Statement, does Umlazi Traders have a
favourable bank balance or an overdraft? Give a reason for your answer. (2)
1.2 Calculate the missing bank balance in the General Ledger of Umlazi
Traders on 30 April 2008. State whether this is a favourable or
unfavourable balance. (6)
1.3 Cheque No 123 does not appear on the May 2008 Bank Reconciliation
Statement. This cheque for commission was not deposited by the payee,
S Smit.
1.3.1 Briefly explain what the problem is with cheque No. 123 (3)
1.3.2 What entries would the bookkeeper have to make during May
2008 to deal with cheque 123. (2)
1.4 Which of the cheques shown as outstanding on the April 2008 Bank
Reconciliation Statement was reflected on the May 2008 Bank
Statement? (Write down only the cheque numbers.) (4)
1.5 The Bank Reconciliation on 30 April 2008 shows the item: Credit Error on
Bank Statement, R 250.
1.5.1 Was this error corrected by the bank during May 2008? Give a
reason for your answer (3)
1.5.2 Give an example of the type of error that the bank could have
made. (3)
1.6 Explain why cheques 335 and 448 appear on both the April and May 2008
Bank Reconciliation Statements. You must provide a different reason for
each cheque (4)

PROBLEM SOLVING

1. 7 As internal auditor of Umlazi Traders, you have noticed that both the April
and May 2008 Bank Reconciliations reflect very large outstanding
deposits. Your investigation into this matter shows that most of these
amounts were in fact received by the cashier before the date on the Bank
Statement.

REQUIRED
List points to include in a report to the Chief Accountant of Umlazi Traders highlighting your
concerns and suggestions on the following points:
1.7.1 What you suspect the cashier is doing illegally which is resulting in
these very large outstanding deposits. (3)
1.7.2 Discuss three internal control measures that could be implemented
within the accounting department to avoid any further problems of
this type occurring. (6)
1.7.3 Discuss two steps that could be taken should your suspicions of
illegal actions by the cashier be confirmed. (4)

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

SECTION D: SOLUTIONS AND HINTS TO SECTION A

QUESTION 1: 42 marks 25 minutes

BANK RECONCILIATION AND INTERPRETATION

1.1 Explain why it is important for a business to prepare a bank

reconciliation statement each month
Good explanation=3 MARKS; Satisfactory=2; Incorrect=0
Expected response
Improves internal control-minimise fraud or error because records are (3)
checked to an external source
1.2 CASH RECEIPTS CASH PAYMENTS
Provisional total 87 000 Provisional total 109 000
T.Twala 3 400 Bank charges 656
Interest on f/deposit 900 Interest on overdraft 989
Stale cheque 8900 Insurance 770
CCheat 2 600
Repairs 218
CORRECT TOTAL 100 200 CORRECT TOTAL 114 233 (12)

1.3 LEDGER OF HAPPY TRADERS

BANK
May1 Balance B/d 6 325 May Sundry
31
31 Sundry Accounts cpj 114 233
accounts crj 100 200
Balance c/d 7 708
114 233 114 233
Jun Balance B/d 7 708
. (6)

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

1.4 BANK RECONCILIATION STATEMENT AS AT 31 AUGUST 2009

Debit Credit
Debit balance as per bank statement 17 087
Credit outstanding deposit 23 456
Debit outstanding cheques:
No.213 (Dated 1 April 2009) 3 400
No. 555(Dated 23 August 2009) 5 678
No.599 (Dated 31 December2009) 4 999
Credit balance as per Bank account 7 708
31 164 31 164 (10)

1.5 Calculate the amount invested in the fixed deposit

R900x12=10 800=10
x=100
x=108 000 any other calculation acceptable
What advice would you provide in order to avoid interest on the overdraft?
Explain briefly
Advice: Liquidate the interest on the fixed deposit
Explanation: The interest on the overdraft will be at a higher rate than the
(5)
10% of the fixed deposit
1.6 Explain why the internal auditor should be concerned about the
outstanding deposit of R23 456
It should appear promptly on the Bank statement
Fraud could be involved. E.g. the cashier. rolling of cash by the cashier
Explain how cheque No.599 should be treated when the financial
Statements are prepared on 31 August 2009. Provide a reason for your
answer.
Reduce the bank overdraftand increase the creditors
The funds have not yet been lost at the Balance Sheet date as the cheque is
(6)
post dated
TOTAL MARKS: 42

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

QUESTION 2

2.1 Why does a business prepare a Bank Reconciliation Statement each

month?
Good explanation = 2 marks; Satisfactory =1; Incorrect =0
Expected responses for 2 marks:
Improves internal control by minimising fraud or error because records are
checked to an external source
Improves internal control by identifying outstanding cheques and deposits
To compare the books of the business with that of the bank in order to
detect errors and/or dishonesty at an early stage
The books of the business and that of the bank should agree and the
bank balance should be the same in both books
To reconcile the bank balance to the bank statement
Expected responses for 1 mark:
Internal control purposes
To reconcile the bank account
To identify the correct bank balance / update records
To identify outstanding cheques and deposits
Errors and dishonesty can be detected on a monthly basis (2)
2.2 Calculate the correct totals in the CRJ and CPJ for October 2010.

CRJ CPJ
Provisional totals 510 000 463 600
# Be alert to 6 200 30 000
R2 630 in CRJ & 102 1 310
R6 230 in CPJ = 5 500 1 700
R3 600 net effect:
18 000
1 mark
Foreign items -1
# 3 600
max -2
Operation if one
521 802 518 210
part correct
(10)

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

2.3
BANK RECONCILIATION STATEMENT AS AT 31 OCTOBER 2010
Debit Credit
Balance as per Bank Statement 40 092
Outstanding cheques:
No. 613 13 400
No. 652 3 800
No. 655 1 300
Outstanding deposits 12 700
Balance as per bank account operation if 34 292
one part correct
52 792 52 792
If 2-column method used without Debit / Credit headings assume
left=Debit and right=Credit
OR single column method OR could start with ledger balance
Balance as per Bank Statement 40 092
Less outstanding cheques: Or brackets or Inspect
may be used treatment of
No. 613 figures to 13 400
No. 652 award marks 3 800
No. 655 if Add/Less 1 300
Add outstanding deposit not reflected 12 700
Balance as per bank account Operation if one part 34 292
correct
- 1 foreign entries max -2 (10)

2.4.1 Any TWO valid steps One mark each

Possible answers:
Set up a disciplinary hearing for Joe to answer to the allegations
Recover what is possible from his salary that is owing to Top Dog
Institute legal action against him (if the costs of the legal action are likely
to be less than the amount recoverable)
Terminate his employment with the firm / fire him
Suspend Joe pending the investigation / move him to another
department
Lay a charge against Joe at the police station and get a case number
Note: Mentioning professional bodies is not relevant. (2)

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GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME

ACCOUNTING GRADE 12 SESSION 15 (LEARNER NOTES)

2.4.2 Any valid explanation which indicates understanding of the rule of prudence
Excellent explanation = 3 marks; Good = 2 marks; Satisfactory =1; Incorrect =0

Expected response for 3 marks:
The business must regard this transaction in a pessimistic light as there is
no certainty that any amounts will be recovered.
Expected response for 2 marks:
The rule of prudence dictates a conservative approach in reporting profits.
Expected response for 1 mark:
Pessimistic approach
Conservative approach (3)
2.4.3 Any valid explanation mentioning division of duties
Full explanation of one aspect = 3 marks
Good explanation = 3 marks; satisfactory explanation = 2 marks; poor
explanation = 1 mark; incorrect explanation = 0 marks
Any aspects listed / mentioned without explanation = 1 mark each
Expected response for 3 marks:
Joe Cryme is responsible for all the vital activities relating to receipts, deposits
and payments. Duties should be divided amongst employees in the business so
that one employee serves as a check on another.
Expected response for 1 mark each (max 2 if no explanation):
Lack of internal control
OR Lack of division of duties
OR Lack of supervision
OR Signatories on cheques are not acting responsibly (3)
TOTAL MARKS: 30

Learner Note: From the above you can see the importance of understanding your concepts
of bank reconciliations. As you attempt the homework, you need to ensure that you are able
to answer the questions in the allocated time frames. If you have problems, you should refer
either to the additional notes or your class teacher.

The SSIP is supported by

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